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Shoptalk: Where Credit is Due.

Sharp losses of advertising revenue, circulation declines, massive layoffs of up to 50% of the journalists at some newspapers -- and recent bankruptcies and closures at others -- create a foreboding spiral. The future of newspapers hangs in the balance, with no remedy in sight. Editors may believe they can maintain print circulation and even know how to expand total circulation, with online included, by improving rather than degrading quality (and avoiding cover-price increases). But layoffs of journalists reflect

attempts either to squeeze higher profit margins or to maintain at least minimal profit margins in the face of reduced newspaper advertising. Newspapers today simply cannot produce the revenue needed to employ enough journalists to provide the quality news that supports prior circ levels.

Before suggesting a solution, one question: Does mourning the possible end of newspapers merely parallel conservative romanticism over a decline of livery stables or family farms, or is something more profound at stake?

The reality is that quality journalism produces huge benefits that go to people other than its immediate consumers, but these beneficiaries do not make payments to the paper. Everyone, not just the paper's readers, benefits by readers becoming more informed voters, thereby leading to a more responsive government. Everyone, not just the readers, benefits when a paper's exposes lead to corrective responses to incompetence or corruption. Everyone benefits when the newspaper has no exposes to report -- or to sell to readers -- because its reputation for quality reporting deters corruption and encourages good performance.

Any sensible cost-benefit analysis must conclude that the failure to adequately pay news entities for these benefits leads to less quality journalism than society needs. As the most important private institution needed for good government, the decline of the news media may be a more direct and serious threat to democracy than, say, terrorist threats.

Is there a solution? The public-good aspects of the press might tempt adoption of a direct subsidy or "bailout." One problem: Media owners are likely to take any direct subsidy out as profit -- or use it for debt payments. And it does not respond to the destructive pattern of reduced revenue leading to layoffs, leading to a degraded product, leading to further circulation losses, leading to further revenue losses.

In addition, a subsidy challenges ingrained notions that the press should maintain an arms-length relationship to government, right? Not quite. At the nation's beginning, Congress believed that spreading news to a far-flung republic was crucial in keeping the nation together and, therefore, legislated major postal subsidies for newspapers. Early in the 20th century, these postal subsidies for the press were roughly $70 million annually or, in today's dollars, a little more than $1.5 billion. Given population growth, this subsidy per person would amount in today's dollars to $6 billion.

This early recognition of the inadequacy of the market and the need to subsidize news and public-interest communications also justified the public-service obligations imposed on broadcasters until late in the 20th century.

Given little hope for advertising to return to old levels, the place to break the press' downward spiral is to reverse the layoff of journalists. How?

Editors already recognize that each journalist employed increases the quality of the paper and thereby marginally contributes to circulation and ad revenue (as well as benefitting the public). The total employment of newspaper journalists in America today is only slightly more than 50,000. Average wages are less than $50,000, creating a collective annual budget for journalists of roughly $2.5 billion. If the federal government, paying with administratively simple tax credits, covered half of each editor or journalist's salary (with credits capped at $45,000 per journalist), this subsidy would cost at present employments about $1.25 billion -- well less than the amount the press was subsidized 100 years ago.

The subsidy would increase dramatically newspapers' incentive to employ journalists, eliminating the rationale for layoffs and leading to increased employment. With more journalists hired, readership would go up.

Our history shows that a subsidy of this magnitude is the norm, not an exception. It reflects the public value of the press. Enactment, however, will only occur if publishers, editors, journalists and the public promote it out of recognition that the future of professional news media depend on such a step. If adopted, the public would benefit hugely due to the press surviving to better perform its democratic Fourth Estate role.

C. Edwin Baker is Gallicchio Professor of Law at the University of Pennsylvania. He has written several books on media economics, media policy, and the First Amendment.
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Author:Baker, C. Edwin
Publication:Editor & Publisher
Article Type:Column
Geographic Code:1USA
Date:Mar 1, 2009
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